Deal values nearly retained momentum in India last year

V Nagarajan

Despite concerns around macroeconomics, corporate governance, changing regulatory norms, geopolitics and global tensions, India’s deal values in 2020 nearly retained momentum with the previous year, according to a survey by PwC titled Deals in India: Annual Review and Outook for 2021.

At an aggregate level, deal values amounted to little over $80 billion across around 1,268 transactions, which is a 7 per cent increase in terms of value as compared to 2019.

The next few years are expected to be challenging for the Indian economy.

However, corporate India has previously demonstrated agility and adaptability in the face of crises. Government reforms and demographic advantage further reaffirm India’s potential as a key investment destination.

Asset monetisation through consolidation

The lockdown in India severely impacted almost every sector.

A number of companies across sectors, including manufacturing, infrastructure, financial services and real estate, faced significant challenges in the pre-Covid era. These sectors were already trying to cope with mounting bad debts and a growing sense of reluctance within the lending and banking communities. However, the situation has been aggravated by the pandemic, which has caused labour disruptions, capital inadequacy and demand contraction, among several other issues.

Special situation funds or distressed funds have already enhanced their operations in India. A number of funds are already allocating capital towards distressed situations or are interested in doing so in the near future. There has been an infusion of approximately $1.5 billion into distressed assets from PE funds this year, a significant increase from last year. Investors will play a crucial role in preserving and enhancing the value of these assets and simultaneously contributing to overall economic recovery. India a priority on the global front. Inbound activity in 2020 recorded an 11 per cent increase over 2019. However, over three quarters of the $13.4 billion invested was concentrated in Jio.

Facebook invested around $5.7 billion in Jio Platforms for nearly a 10 per cent stake - possibly one of the largest deals to be completed virtually during the lockdown. This was followed by a $4.5 billion investment from Google for a 7.7 stake in Jio Platforms.

There was FDI worth USD 30 billion in India during April- September 2020, a 15 per cent increase over the same period last year. FDI will continue to play a crucial role in the economic development of India. Apart from supplementing domestic capital, it would also bring in improved governance, operational capabilities and international expertise.

Shift in investor priorities

Over the last few years, technology, energy, financial services, infrastructure and real estate have been among the top sectors attracting PE investment. However, there has been a slight shift in investor priorities in 2020. Despite multiple concerns, including demand contraction and labour shortages, PE funds infused nearly $5 billion in the real estate (RE) sector this year.

60 per cent of the investment was on account of Brookfield and Mitsui’s investments in the RMZ Corporation. Excluding these deals, investments in RE remained muted.

As expected, 2020 was a record year for PE investments in the healthcare and life sciences segment. Pharmaceuticals accounted for a majority of the $2.5 billion invested in this sector.

Outlook for 2021

Considering the current situation, the government has introduced several reforms focused on labour, sectoral drivers and policy amendments to bring much needed liquidity into the market, and drive the revival of core sectors.

 Equipped with a demographic advantage, strategic location for exports, expanding consumer market and focus on digitalisation, India is well positioned to become an economic powerhouse of the future.

With corporate India focused on recapturing demand and building organisational resilience, supportive government reforms and policies will create a more conducive business environment for the investor community.

We are in the process of selling our deceased father’s property in India with two legal heirs there and I am located in the Gulf. Due to the dislocation I am unable to travel. Can a power of attorney resolve the situation to close the deal? Dharmadev, Sharjah.

 Yes. You will have to get attestation of the specific power of attorney in the Gulf with the Indian consulate.

You may grant PoA to either of the two legal heirs in India for the purpose of executing and registration of sale deed. Once it is received in India, it has to be stamped and signed with the appropriate stamp duty.

I have invested in commercial property in Bangalore and wish to mortgage the unit to raise funds. Does it require any approval from the authorities? Are there restrictions while mortgaging it to the banks or other lending institutions? Please clarify. Joshino, Dubai.

You can mortgage the commercial property to an authorised dealer/housing finance institution in India without the need to get any approval from the authorities.

You can also mortgage to a party abroad but with prior approval of Reserve Bank of India.